Benefit from GST probably won’t show up next year: Poll

Economic growth is probably at its weakest pace this fiscal year since before a new calculation methodology was introduced in 2014-15, the Jan. 10-18 poll of about 30 economists found.

India’s economy won’t significantly benefit from a goods and services tax until after next fiscal year, according to a slim majority of economists polled by Reuters, but almost half said rewards might come sooner.

Economic growth is probably at its weakest pace this fiscal year since before a new calculation methodology was introduced in 2014-15, the Jan. 10-18 poll of about 30 economists found.

Disruptions from the goods and services tax and a ban on high currency notes in November 2016 curtailed growth and manufacturing, services and consumer spending. Consequently, 15 of 28 economists said benefits from the tax wouldn’t be felt until at least the fiscal year starting April 2019.

But signs of a recovery in activity are appearing, and 13 of the 28 said benefits may show up next year.

The poll also forecast the economy would grow 6.6 percent this fiscal year and 7.3 percent next year.

“Disruptions from the GST and demonetization are expected to start receding from Q218 (April-June quarter) and a pick-up in consumption, investment and growth shall commence,” said KK Mital, investment advisor at Venus India.

The latest consensus was lower than the forecast three months ago.

An early realisation of the benefits would bring some relief to the Reserve Bank of India, which will need to deal with higher inflation over the coming years, the poll showed.

After averaging 3.7 percent this fiscal year, consumer price inflation is now expected to exceed the RBI’s medium-term target of 4 percent each quarter through mid-2019, the end of the forecast horizon. It is expected to average 4.6 percent next year.

“Upside risks (to inflation) stem from higher oil and food prices, currency depreciation, an accelerating economy and fiscal slippage,” said Arjen van Dijkhuizen, senior economist at ABN AMRO.

Even so, the RBI is forecast to leave interest rates unchanged until at least the middle of next year. At its last meeting in December, the central bank said inflation risks were “evenly balanced”.

However, high growth and inflation numbers might prompt a change in the RBI’s neutral policy stance. The consensus forecast among 24 economists was that an inflation level of 5.5 percent would prompt the central bank to consider raising rates.

“As long as various gauges of underlying inflation track sub-5 percent, the RBI should stay pat,” said Abhishek Upadhyay, economist at ICICI Securities PD. “A worsening of other macro stability indicators on account of higher crude prices can make the RBI cautious.”

PFRDA allows 25% withdrawal after 3 years in NPS; 9 points every subscriber must know

Earlier, partial withdrawal was allowed only after completion of 10 years of subscription.

In a major relief to subscribers of the National Pension Scheme (NPS), the Pension Fund Regulatory and Development Authority (PFRDA) has cut down the time period for partial withdrawals subject to certain contingencies. NPS subscribers who have contributed for three years can now withdraw up to 25 per cent of the contributions, as per PFRDA’s latest circular. Earlier, the partial withdrawal was allowed only after completion of 10 years of subscription.

The decision has been taken after several requests from from subscribers, PFRDA Chairman Hemant Contractor told Business Standard.

“There was a lot of demand coming from the subscribers saying that 10 years is too long a period and in case of an emergency, they couldn’t wait so long,” Contractor told the paper.

The relaxation in withdrawal norms subject to certain conditions. Here we take a look at important points every NPS subscriber should be aware of:

  • Withdrawals are allowed for treatment of specified illness including family members, education of children, marriage expenses of children and purchase or construction of house.
  • The NPS subscribers are only allowed to withdraw the specified sum of money for treatment if the ailment suffered fall in the category of disease including cancer, kidney failure, multiple sclerosis, major organ transplant, stroke, heart valve surgery, coma, paralysis and total blindness among a few other major illness.
  • The education expenses include an amount of money spent for the studies of subscriber’s own children including the legally adopted children.
  • For wedding expenses, the 25 per cent withdrawal can be made allowed so long as the subscriber’s own child is getting married, including the legally adopted child.
  • The subscribers can withdraw money for construction of house only if the structure belong to them or in a joint name with their legally wedded spouse, that too if the subscribers don’t own more than one house besides their ancestral properties.

 

Allowing more FDI into banks may be good but need more holistic changes: Baring Pvt

Unless more holistic changes are made in PSU banks, just raising the cap for FDI will not result in a rush of capital into them, said Munish Dayal, Senior Partner, Baring Private Equity Partners India.

India’s banking landscape could undergo a massive overhaul — CNBC-TV18 learns that the government is considering a proposal to allow 100% foreign direct investment (FDI) in private banks – and is also mulling a hike in FDI cap from 20 percent to 49 percent for public sector lenders as well.

To discuss if this development could meaningful change the outlook for the banking sector, CNBC-TV18 spoke to Munish Dayal, Senior Partner, Baring Private Equity Partners India.

Any opening of the sector was overdue and would be good, says Dayal, adding that it was earlier proposed in 2015 but did not go through. Moreover government going forward with its reform agenda is opening up sectors like aviation, retail, and now banking, which is a step in the right direction, says Dayal.

According to him, even if the government may increase the limit of foreign capital to 49 percent in public sector banks, it is not necessary that foreign capital will come rushing into these banks.

“This step in no way suggests, privatization of PSU banks, nor is it suggesting raising cap of 10 percent holding per foreign holder and nor does it suggest that by raising foreign capital, the holder will have the ability to be on board, or change management, governance structure,” says Dayal.

Therefore, unless more holistic changes are made in PSU banks, just raising the cap for FDI will not result in a rush of capital into them, says Dayal.

With regards to private sector banks, the only bank hovering near the limit is HDFC Bank, says Dayal, adding that others are much below the existing 74 percent limit.

Will grow in high double-digits on a GST-adjusted basis: TTK Prestige

TTK Prestige was up and about in trade yesterday with a 7 percent gain, although the stock has cooled off today. In an interview with CNBC-TV18, TT Jagannathan, Chairman of the company discussed how business is progressing this quarter.

TTK Prestige was up and about in trade yesterday with a 7 percent gain, although the stock has cooled off today. In an interview with CNBC-TV18, TT Jagannathan, Chairman of the company discussed how business is progressing this quarter.

Demand scenario is looking better and there is a large rural push, which is aiding demand, he said.

It is a pleasant surprise that the rural market is doing well, he added.

The company has launched a range of kitchen appliances under UK brand.

We will grow in the high double-digits on a goods and services tax (GST) adjusted basis, said Jagannathan.

Speaking of the water purifier segment, he said that this segment is very underpenetrated. India requires to purify the water at every level, so we have started with a non-electric water purifier which is the largest market in terms of size.

We will be adding products in the water purifier segment, he further mentioned.

On capex plan, he said that we are contemplating capex now.

See upside for nickel, lead & copper prices; not upbeat on gold: Societe Generale

The house has a negative view on gold for Q4 of this year and expect it to trade around to trade around USD 1200-1250 per ounce, said Mark Keenan, Head of Commodities Research – Asia, Societe Generale.

The year 2017 was a spectacular year for commodity prices, while 2018 has also started on a positive note but to get the outlook for the future, CNBC-TV18 spoke to Mark Keenan, Head of Commodities Research – Asia at Societe Generale.

He said the house has increased their fundamental price forecast for Brent crude upto USD 62 per barrel, which means we still remain bearish with respect to forward prices and current prices. Therefore, there is about USD 6-7 risk premium in the market currently.

The reason for the fall in prices could be varied, said Keenan. One is the cold winter in Japan and North America, which was supporting the prices won’t last forever. Moreover, some of the geopolitical risk issues are starting to ease and easing in areas like Libya, Iraq etc, as well Q2 is also a seasonal slowdown period.

He also expect Russia and OPEC to maintain their compliance with regards to output quotas for rest of the year and the US shale production to increase about a million barrels of crude production this year but currently, that growth is offset by declines in some of the OPEC producing countries like Venezuela and Iraq. So, it broadly balanced market.

With regards to metals, he said the base metal complex did well last year and continues to be supported by dollar weakness at the momentum, by anticipated supply deficits and declining inventories.

According to him, nickel, lead and copper could see some upside. With regards to copper, there could be some output disruptions, helping prices remain elevated.

The house has a negative view on gold for Q4 of this year in context of three interest rate hikes in US, lack of physical demand in Asia, increasing in recycling of gold in Asia. Gold is likely to trade around USD 1200-1250 per ounce for Q4.

China’s state-run daily launches stinging criticism of the Indian Army

The report claims that the action by the army is nothing but an attempt to beef up its budget and get a bigger say in the foreign policy of New Delhi.

Indian army must tone down its hawkish rhetoric, warned Chinese government mouthpiece Global Times. The threat comes days after army chief General Bipin Rawat had stated the need for the army to shift its focus to the Chinese border.

The story that was published recently follows the news that came weeks back about an incursion attempt by China in the name of road construction. While the Indian Army action which was followed by the withdrawal from Chinese side was never really acknowledged by the Chinese media, the article indirectly mentioned about the development by stating that India is showing a keen interest in blocking China’s infrastructure construction in the border area.

It also added that since last year’s Doklam standoff, the Indian army has become more active across the India-China border and is planning to improve its infrastructure in the area.

Indian army must tone down its hawkish rhetoric, warned Chinese government mouthpiece Global Times. The threat comes days after army chief General Bipin Rawat had stated the need for the army to shift its focus to the Chinese border.

The story that was published recently follows the news that came weeks back about an incursion attempt by China in the name of road construction. While the Indian Army action which was followed by the withdrawal from Chinese side was never really acknowledged by the Chinese media, the article indirectly mentioned about the development by stating that India is showing a keen interest in blocking China’s infrastructure construction in the border area.

It also added that since last year’s Doklam standoff, the Indian army has become more active across the India-China border and is planning to improve its infrastructure in the area.

‘The Indian media has been magnifying everything obtained from the military, applauding hawkish army remarks and fabricating scenes of China infringing upon and provoking India… Coordinated interactions between the Indian army and media have fed many Indians’ negative impressions of China.’

However, what is surprising about the article is the fact that while it has been critical of both Indian Army and the media, it also tries not to be critical of the government authorities. As per the report, the alleged actions by the media and the army are against the efforts made by leaders from both countries who have agreed that ‘the two countries will properly manage their disputes and put bilateral ties back on the track of healthy and stable development.’

The article further claims that the action by the army is nothing but an attempt to beef up its budget and get a bigger say in the foreign policy of New Delhi.

The article suggests Chinese authorities to take a much more careful approach while dealing with India, stating that the country, even while improving its relationship with countries in South East Asia should also ensure that it addresses the anxieties of the country.

The article, however, concludes with a warning, that India should cherish the amicable policy adopted towards it by China and that it will face harsh punishment from the Chinese army if it continues with provocations.

The article indicates China is perturbed with the recent proactive policy adopted by the Indian army on the border amidst fear in Beijing that New Delhi is shifting more closer to the US.

Galaxy Surfactants gets Sebi’s go-ahead to float IPO

The company had filed its draft papers with Securities and Exchange Board of India (Sebi) in November last year and obtained ‘observations’ from the regulator on January 12, 2018, the latest update with markets watchdog showed.

Speciality chemicals manufacturer Galaxy Surfactants has received capital markets regulator Sebi’s go-ahead to raise an estimated Rs 1,000 crore through an initial public offer (IPO).

The company had filed its draft papers with Securities and Exchange Board of India (Sebi) in November last year and obtained ‘observations’ from the regulator on January 12, 2018, the latest update with markets watchdog showed.

Sebi’s observations are very important for any company to launch a public offer.

During Galaxy Surfactants’ initial share sale, as many as 307 shareholders will sell 63,31,674 shares of the company, according to the draft red herring prospectus (DRHP).

“The objects of the offer are to achieve the benefits of listing the equity shares on stock exchanges and the sale of equity shares by the selling shareholders.

“Further, our company expects that listing of the equity shares will enhance its visibility and brand image and provide liquidity to its existing shareholders,” the draft papers stated.

According to merchant banking sources, the IPO is expected to fetch Rs 1,000 crore.

ICICI Securities, Edelweiss Financial Services and JM Financial Institutional Securities will manage the company’s public issue. The firm’s equity shares are proposed to be listed on BSE and NSE.

This is the company’s second attempt to go public.

Earlier in 2011, Galaxy Surfactants had entered the capital markets to raise over Rs 200 crore through its initial share sale. However, it withdrew from the IPO market due to tepid response from investors.

Bank of India postpones Rs 3,000 cr QIP plan

“The decision to drop the QIP plan has not been taken because of the Prompt Corrective Action (PCA). It was taken before the PCA (by RBI).

State-owned Bank of India (BoI) has deferred the Rs 3,000-crore capital raising plan through private placement of equity shares after the government’s move to infuse Rs 2,257 crore capital into it, a top official said.

“We have postponed the QIP (Qualified Institutional Placement) as the government decided to infuse Rs 2,257 crore capital support into the bank obviating the need for the capital immediately,” BoI Managing Director Dinabandhu Mohapatra told PTI.

So, there is now no need for QIP this fiscal as more capital would also flow-in through recap bonds, he said.

“The decision to drop the QIP plan has not been taken because of the Prompt Corrective Action (PCA). It was taken before the PCA (by RBI).

“Since some positive developments were taking place on resolution of stressed assets under NCLT (National Company Law Tribunal) and the government had indicated more capital infusion, we decided to wait for the actual infusion on the book and then go to the market for QIP. This way we will get more value for our shares,” he said.

It is to be noted that the bank has been placed under the Prompt Corrective Action (PCA) framework by the Reserve Bank of India (RBI) following inspection of books in March 2017.

The central bank downgraded some of BoI’s accounts impacting profitability as well as non-performing asset (NPA) position. As a result the Common Equity Tier 1 (CET1) came under pressure necessitating need for capital infusion for the government.

However, the bank expects to be out of the RBI’s watchlist soon as it has put in place an aggressive bad loan recovery strategy.

BoI had last tapped the market in November last year to raise Rs 500 crore capital through AT-1 bonds.

Talking about other sources of raising capital, Mohapatra said, the bank is also looking at selling some of the non-core assets.

The bank has already floated a Request for Proposal (RFP) for selling its entire 29 per cent stake in STCI (formerly known as Securities Trading Corporation of India) Limited as part of sale of its non-core assets, he said, adding the transaction should happen this fiscal itself.

Will Budget 2018 rejig tax slabs, clarify tax treatment on Bitcoin? Here are a few expectations

Tax experts expect FM Arun Jaitley to raise the investment cap under Section 80C of I-T Act to around Rs 2.5-3 lakhs.

Will Finance Minister, Arun Jaitley, provide relief to individual tax-payers in the coming Union Budget? With the Budget to be the last full one of present government of Prime Minister Narendra Modi, there are hopes that it might include major reliefs for taxpayers with an eye on the general elections in 2019.

“With the implementation of GST and the demonetisation decision, during last 1 year, as per Government’s own statements, the tax base and number of taxpayers under tax net have increased significantly.  In view of this, the Government may give some significant relief to taxpayers in the Budget,” Rakesh Nangia, Managing Partner, Nangia & Co told.

Nangia feels that among other things, there are expectations that the government might slightly alter the tax-slabs and increase the investment cap for tax relief under Section 80C of the Income Tax Act.

Nangia listed out the following expectations from the Budget:

Rejig in income tax slabs: Presently, taxable income up to Rs. 2.5 lakhs is exempt from tax from individual taxpayers.  Income falling between slabs of Rs 2.5 lakhs to 5 lakhs, Rs 5 lakhs to 10 lakhs and above Rs. 10 lakhs are taxable at rate of 5%, 20% and 30% respectively. Substantial relief to middle income group taxpayers may be available, if the Government rejigs the tax slabs and introduce another slab of 10% for income slab between Rs 5 lakhs to Rs 10 lakhs.  Further, limit of Rs 10 lakhs for applying highest tax rate of 30% may also be revised upwards considering increased expenditure levels.

Increase in limit for investment in tax-saving schemes: Presently, deduction of a maximum Rs 150,000 is allowed to all individual taxpayers for investing in various tax saving schemes, such as EPF, PPF, life insurance schemes, National Savings Certificates, ELSS, etc. under section 80C.  Additional deduction of up to Rs. 50,000 is allowed for investment in National Pension Scheme under section 80CCD (1B).  The Considering the increase in cost of living and consequently increase in need for higher savings, it is expected that the cap of permissible deductions under above-mentioned sections may be increased to around Rs 2.5-3 lakhs, to encourage individuals to save more towards their retirements.

Increase in monetary limit for medical reimbursements, transport allowances: It is also expected that limits for certain tax free reimbursements/allowances to salaried taxpayers, such as Rs. 15,000 per annum for medical reimbursements, Rs 1600 for transport allowance, etc. may be increased to meet the increased cost of medical and transportation.

Archit Gupta, Founder & CEO, ClearTax, hopes that the medical reimbursement limit should be doubled to Rs 30,000. “Saving tax on medical bills has always been a popular demand. A limit of Rs 15,000 is barely enough for even a small family, let alone a big one. With doctor consultation fees increasing by the day and a child’s vaccination going up to Rs 2000 for just one shot, it will only be fair if the government raises the limit to at least Rs 30,000,” he said.

Measures to make NPS preferable: Saving for Retirement! Most of us do understand why it is important to save up for the post-retirement years but it’s still a concept oblivious to some. For the matter of fact, EPF or PPF or a property are the only three resorts people count upon for the most needed years. While EPF is tax-free, returns are quite low and it can be really difficult to accommodate such goals. PPF has an Rs 1.5 Lakh limit owing to which one cannot invest a lot of money in it. In such a case, NPS is a product which can help taxpayers invest for retirement as it invests in equity to match the risk profile. But NPS is still not preferred due to the taxation of at least 20% of corpus at the time of withdrawal. Besides, a major half must also be invested in an annuity. What will make this an effective and endorsed mode of investment is if a higher corpus is allowed to be withdrawn without tax implication, as well as raise the annuity rates for NPS.

Clarity on bitcoin taxation: Despite RBI’s cautionary for investors about bitcoins not being authorised; they continue gain more popularity in India. The government should already talk about the tax implications of investing in Bitcoins and also whether this will require disclosure in tax returns forms or not.

LTCG exemption on equities should continue: Since the indirect taxes collections being lower than expected, the government may have to find other ways to boost revenue. Taxing long term gains from equity markets that currently enjoy 100% tax exemption could be one option. However, this will not make a good news for the middle class that is finally reaping the benefits of investing in equity over long term. Post the demonetisation, a massive amount of money has already gone into equity markets, so hoping this does not participate in 2018’s Budget policy.

Simplification of tax laws: Nobody wants a layered tax system which unfortunately is the case today. With all the redundant layers of taxes on merely a good or a service, the clutter needed to be fixed immediately. Which is why the government set up a special task force for the simplification of direct taxes. Let’s hope this task force rejuvenates our tax system and adds relevance to it.

Tax benefits on Philanthropy: India is progressing overall, no doubts. But there are few areas such as sanitation, education and healthcare that need severe care, funding and attention. Apart from the government taking measures, individual philanthropists can play a critical role in changing the conundrum of a situation. While philanthropy is actually a fitting idea, allowing tax benefits will only encourage more people. As of now, tax benefits are only available on donations made under Section 80G or to projects eligible under section 35AC, only when pre-approved by the government. Extending tax benefits to individual philanthropists who make large donations in education and healthcare sector, will definitely encourage others too.

Govt willing to hand-hold young entrepreneurs: PM Modi

Addressing the students of the Gautam Buddha University in Greater Noida on the occasion of the inaugural programme of the 22nd National Youth Festival, Modi, via video- conferencing, said one had to make the beginning alone and if the person was committed to the path chosen, others would join him.

The youth of today should become job creators and think out of the box, for which the government is willing to hand-hold them for setting up start ups, Prime Minister Narendra Modi said today.

He also said that while patience was a virtue, it should not stop the youth from coming up with innovative ideas for the benefit of the country and society.

Addressing the students of the Gautam Buddha University in Greater Noida on the occasion of the inaugural programme of the 22nd National Youth Festival, Modi, via video- conferencing, said one had to make the beginning alone and if the person was committed to the path chosen, others would join him.

“Do not worry. Move ahead, take the first step. The government is with you,” he said, referring to those youth planning to set up start-ups.

The prime minister assured them that they would not have to worry about bank guarantees, loans and a heavy paper work as they would get all the help from the government.

“We will hand-hold you. Then, you are yourself capable of moving ahead,” he told the gathering where Uttar Pradesh Chief Minister Yogi Adityanath was also present.

Referring to the Centre’s Mudra scheme, Skill India and Startup India funds, Modi said there were enough platforms to help young entrepreneurs think out of the box and begin something new.

He also urged the people to make sports an integral part of their lives.